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Cheney Merchants mislead on interchange

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WASHINGTON (4/6/11)--Also on the interchange front today, Credit Union National Association (CUNA) President/CEO Bill Cheney is featured in a USA Today editorial urging readers not to be swayed by retailers misleading rhetoric, which obfuscates the interchange debate. Cheney in his editorial noted that while some claim that arguing against the Federal Reserve’s interchange cap regulations means supporting “bank bailouts” or lining the pockets of Wall Street bankers, that claim leaves out one important detail: small institutions, including credit unions and community banks, “are Main Street.” “Nobody is lining our pockets,” he added. And while merchants and others have claimed that allowing the Fed to cap interchange fees would be “pro consumer,” Cheney noted that the proposed law would “have a profound impact on how members are served by their credit unions, likely forcing them to charge new and unwanted fees for debit cards.” “That's not ‘pro-consumer,’" he said. Cheney in his editorial reiterated CUNA’s call to stop, study and start over on interchange fee legislation. “Before the law and rules take effect, the impact on consumers — including 92 million credit union members — should be properly explored,” he said. Some of the effects of this legislation are already known: Funds that credit unions use to cover the cost of offering and maintaining debit card accounts will be curbed. Cheney noted that recovering debit-related costs “might not be a big deal” for the big banks. “They already charge very high fees, and some have said that free checking is a thing of the past,” he said. However, Cheney warned that “member-owned, not-for-profit credit unions might also have to pass the costs on to their members — as lower return on savings or as fees on debit cards or other transactions.” “It's the last thing credit unions want to do, but they might have no choice,” he said. Legislation introduced by Rep. Shelley Moore Capito (R-W.V.) would delay interchange rate cap implementation by one year while the Fed studies interchange's impact on consumers, credit unions and merchants. That legislation has 71 cosponsors, including former House Financial Services Committee Chairman Barney Frank (D-Mass.). Sen. John Tester's (D-S.D.) bill, which would order a similar study and would delay implementation by two years, has 17 cosponsors. CUNA, credit unions and credit union leagues are offering a host of new resources that will help consumers engage their congressional representatives on this crucial issue. For the USA Today editorial and more on CUNA’s grassroots interchange action, use the resource links.

CUNA CUs seek exemptions from CFPB rules

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WASHINGTON (4/6/11)—SECU of Maryland CEO Rod Staatz later today is expected to encourage legislators to urge the Consumer Financial Protection Bureau (CFPB) to exempt credit unions, and the pro-consumer products they provide, from any onerous rules that the CFPB may create.
SECU of Maryland CEO Rod Staatz, shown speaking before the Consumer Federation of America in 2009, will testify on behalf of his credit union and CUNA during today’s hearing. (CUNA Photo)
Staatz will testify before a House Financial Services Financial Institutions & Consumer Credit Subcommittee hearing on legislative proposals to improve the structure of the Consumer Financial Protection Bureau (CFPB). Section 1022 of the Dodd-Frank financial reform package, which authorizes the CFPB to administer, enforce, and implement financial regulations, also gives that agency the authority to exempt any class of covered entities or products from its rules. A formal exemption process has not been established, and Staatz will implore subcommittee members to ensure that a process is created in a timely fashion. The SECU CEO is one of six panelists that will testify on H.R. 1121, the Responsible Consumer Financial Protection Regulations Act, and H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act. H.R. 1121 would replace the single CFPB director with a five member Consumer Financial Protection Commission. Staatz is expected to suggest that legislators add additional positions to the commission, including a spot for a regulator with credit union experience. The hearing is scheduled to begin at 10 A.M. ET.

Form 1099 changes just need presidents signature

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WASHINGTON (4/6/11)--The Senate on Tuesday approved by a vote count of 87 to 12 a bill that would repeal a burdensome extension of Internal Revenue Service Form 1099 reporting requirements. As a "pay-go" effort to offset the cost to taxpayers of the new healthcare reform law, Congress last year extended the 1099-MISC reporting provisions to cover payments for goods valued over $600. Rep. Dan Lungren’s (R-Calif.) H.R. 4 would repeal this extension, and would also repeal an additional Form 1099 rental real estate related reporting requirement. Credit unions and other businesses have long been required to report to the on Form 1099-MISC certain payments of $600 or more that will be considered income by the IRS. Lungren’s legislation, which passed the House with 324 affirmative votes last month, incorporated language authored by Rep. Dave Camp (R-Mich.). Lungren hailed the Tuesday passage of the bill as “a great day for small business owners in (his) district and all across America.” Camp in a release estimated that the tax law change would save taxpayers $20 billion over a 10 year span and would reduce the deficit by more than $166 million over that same time period. The Credit Union National Association earlier this year backed the bill, noting that requiring 1099-MISC forms on goods was extremely burdensome and had questionable value in actually increasing federal revenue. Camp implored President Barack Obama to work with legislators to “find other ways to reduce the heavy burden of federal mandates, regulations and paperwork that take employers’ time, energy and resources away from creating jobs.” President Obama must still sign the bill before it can become law.

Inside Washington (04/05/2011)

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* WASHINGTON (4/6/11)--Elizabeth Warren defended her role in pending mortgage settlement talks in a letter sent to House Financial Services Committee Chairman Spencer Bachus on Monday. Warren, in charge of setting up the Consumer Financial Protection Bureau (CFPB), was responding to complaints that she went further than providing advice in addressing alleged careless mortgage practices by big banks. In the letter, Warren said the CFPB provided advice to federal and state officials regarding the potential servicing settlement, but added it would be inappropriate for her to disclose the contents of the inter-agency discussions. She stressed that the CFPB is not conducting settlement negotiations with mortgage servicers …

Franks call for interchange delay significant says CUNA

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WASHINGTON (4/6/11)—Rep. Barney Frank’s comments in support of a delay of the Federal Reserve’s debit card interchange fee rule are “extremely welcome and helpful,” said Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill, and their importance “cannot be overstated.” Frank, of Massachusetts, is the ranking minority member of the House Financial Services Committee as well as a key author of the Dodd-Frank Wall Street Reform Act. On Tuesday, he announced his support of legislative action to postpone the deadline for the Federal Reserve to issue a rule on debit card interchange fees. In his statement of support Frank noted a recent announcement by the Fed that it would not be able to meet a statutory deadline of April 21 to propose a final rule. The Dodd-Frank Act requires the Fed to meet that deadline to propose a rule to set a ceiling on what debit card issuers may charge retailers who use that payment system. “The Federal Reserve’s announcement that they cannot meet the deadline on interchange fees confirms my view that this is the only part of the financial reform bill that needs to be amended. For this reason, I support legislative action to postpone the deadline so that we can revisit it,” Frank said. He did not address a July 21 effective date that is also set by the law. The Credit Union National Association also supports a delay and has backed bills in the House and Senate. Rep. Shelley Moore Capito's (R-W.V.) bill would delay interchange rate cap implementation by one year while the Fed studies interchange's impact on consumers, credit unions and merchants. That legislation has 72 cosponsors and is known as the Consumers Payment System Protection Act (H.R. 1081). Sen. John Tester's (D-S.D.) bill, the Debit Interchange Fee Study Act of 2011 (S. 575), would order a similar study and would delay implementation by two years. It has 17 cosponsors.

FASB impairment changes unneeded CUNA says

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WASHINGTON (4/6/11)--Noting that credit unions are already “among the most highly regulated financial institutions in this country,” the Credit Union National Association (CUNA) has said that a number of proposed accounting changes are inappropriate for credit unions. Under a joint Financial Accounting Standards Board (FASB) / International Accounting Standards Board (IASB) proposal, entities would need to base expected losses on all available information—including forward-looking information, as well as assign financial assets to a "bad book" or "good book" for purposes of determining their impairment allowance. CUNA in a recent comment letter to FASB said that these and other changes to accounting for the impairment of certain financial instruments are inappropriate for credit unions because of their unique cooperative structure. Credit union members “already receive significant disclosures about the accounts they wish to open and maintain and about the financial condition of their institutions,” and thus there would likely be little, if any, benefit in providing their members with additional disclosures, CUNA added. In addition, CUNA questioned whether such disclosures “should be imposed on credit unions through the accounting standards setting process.” CUNA suggested that financial institution regulators such as the National Credit Union Administration would be better equipped to impose these disclosures. However, CUNA added, there is no evidence that additional disclosures are needed. The proposed requirements may be more appropriate for publicly traded entities, especially since shareholders’ investments in a publicly traded company are subjected to risks that generally do not apply to credit union deposits,” which are generally insured up to $250,000 per account, the comment letter adds. Portions of the proposal are likely “too complex for many entities and may be inconsistent with the actual practice of estimating losses or managing credit risk,” CUNA said. Specifically, CUNA said it is concerned that many smaller reporting entities lack the ability to accurately estimate the lifetime expected losses of open portfolios of assets. Many of FASB’s suggested financial statement changes could severely burden credit unions while supplying little or no benefit to the credit union, its members, or its regulator, CUNA added. CUNA encouraged FASB to extend the comment period on this proposal. However, the comment period ended late last month. For the full comment letter, use the resource link.

NCUA responds to FCU director rule concerns

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ALEXANDRIA, Va. (4/6/11)—Recent National Credit Union Administration (NCUA) rules on the duties of federal credit union directors, and limits on the forms of payment that those directors can be given, do not present new problems for credit union leadership, NCUA General Counsel Bob Fenner said. Fenner’s remarks were made in a recently published legal opinion letter. That letter responded to an earlier letter that was cosigned by the Credit Union Association of Colorado, the Credit Union Association of Wyoming, the Northwest Credit Union Association, the Montana Credit Union Network, the Arizona Credit Union League, the California and Nevada Credit Union Leagues, and the Idaho Credit Union League. The leagues alleged that the NCUA’s new rules addressing the duties of federal credit union directors create “a litigation trap for credit unions who may be accused of not acting in the interests of a particular faction” of credit union members. The letter added that many board actions can bolster the credit union itself without harming members. However, those members also may not “find immediate benefit,”the letter adds. Fenner said that the NCUA rule does not shift the burden of proof onto a credit unions directors, and does nothing to increase the odds of a successful lawsuit against those directors. Fenner also said that the NCUA’s rules do not require management “to consider only the ‘immediate’ benefit” to their members. “Directors can consider, and are encouraged to consider, the long term benefits” to their members, Fenner added. The Credit Union National Association (CUNA) is in active dialogue with NCUA officials on the issues addressed by this letter, and CUNA will seek clarification on the issues raised by the letter in further discussions with the agency. For the full legal opinion letter, use the resource link.